Question

Molly must drive across a bridge over a river eight times each week. Because the bridge is narrow and traffic is congested, Molly's willingness to pay for the eighth and final weekly trip is $0.50. Now the governor has promised to refurbish this old bridge and widen it to lessen the congestion and increase traffic flow over the river. Molly will have to pay extra taxes to finance the repair, but the toll for crossing the bridge will fall, and she expects to make 10 trips instead of just 8. How would you figure out how much Molly is willing to pay in taxes for the bridge repair?

Answer 1

Based on Molly's willingness to pay for the 8th trip, and the number of trips she can make over the bridge, her willingness to pay for the bridge repair would be $1.00.

What is Molly's willingness to pay for taxes to fix the bridge?

Molly's willingness to pay for trips is equal to the total consumer surplus she gets.

This means that her consumer surplus is $0.50.

With the bridge fixed, she can make 2 more trips than before because she can make 10 trips.

Her willingnesss to pay for the taxes will therefore be equal to her willingness to pay for the remaining trips:

= 0.50 x 2

= $1.00

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